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Dec
10

Is the drop in work comp claims frequency a myth?

An article in Human Resource Executive highlights the results of a report by the Government Accountability Office on workplace injuries, specifically noting many employers fail to report injuries and illnesses for fear of increasing their workers’ compensation premiums.
It’s not just employers, as many workers don’t report occupational injuries out of fear that they’ll be fired or disciplined, or their injury will taint their department’s unblemished safety record. The implications of this are significant and far-reaching.
According to the article,

Employers that deliberately under-report injuries in order to protect their workers’ comp insurance rates are committing fraud — fraud that will impact the entire business community, says Paduda [I was a source for the piece].
“Because of this fraud, workers’ comp insurers have been assuming much greater risk than they’ve been pricing for,” he says. “This will eventually lead to a lot more audits by insurance companies of their clients and much higher rates for everyone, especially when the current ‘soft market’ for workers’ comp insurance ends, which it soon will.”
It may also lead to higher rates and more audits from group health insurers due to injured or ill workers seeking treatment from their primary-care providers instead of their company’s workers’ comp provider, says Paduda.
“Group health insurers are growing more suspicious that many of the claims they’re seeing are the result of workplace injuries and will try to subrogate those claims to the parties they believe should be paying for them.”

Another report by the National Employment Law Project highlighted the problems faced by low-wage workers when they are injured on the job. The study looked at a population that accounts for fifteen percent of all workers in just three cities; Chicago, New York, and Los Angeles. Extrapolating the numbers out in just those three cities indicates that 75,446 workers comp injuries were not reported.
What does this mean for you?
For the comp industry, the declining frequency years may be coming to a screeching halt.
If you’re a work comp payer, you’ve been ‘lucky’ if you insure these businesses. That ‘luck’ will soon change as the Department of Labor is dramatically ramping up enforcement efforts. (I don’t mean to imply that comp carriers have somehow been complicit in this, in fact the opposite is much more likely as insurers work very hard to ensure rapid and accurate claim reporting.)
If you’re a TPA or other servicing entity, your revenues have been suppressed by the failure to report injuries.
And if you’re one of these low-wage workers, perhaps there’s hope that the situation will improve.


One thought on “Is the drop in work comp claims frequency a myth?”

  1. While it’s pretty well established that injuries overall are under-reported, it’s harder to argue that fatalities are. So fatalities may be a more reliable indicator of underlying trends in actual cases. BLS reports a drop of about 11 percent in private-sector fatalities between 2007 and 2008. Given continued weakness in labor markets, it’s likely that the 2009 number will be down relative to 2008. Of course it’s possible that both claims and fatalities will rise when employment picks up.

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Joe Paduda is the principal of Health Strategy Associates

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